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One Totally Different Reason To Consider Buying A Home This Winter 2007-11-19 09:24:41 Since November 1, the following banks have written-down at least $1 billion in their respective loan portfolios: Bank of America Barclays Bear Stearns Citigroup HSBC Morgan Stanley Wachovia Wells Fargo This is a big deal to home buyers and home sellers because when banks repeatedly take mortgage-related losses, it can lead to major risk aversion -- even for "good" borrowers. It's one reason why mortgages are more difficult for which to qualify than in months past. Banks would rather pass on an "avergage" mortgage application rather than be stuck with a potentially "bad" loan. If banks continue down this path throughout 2008, it means that buyers eligible for home loan financing today may be ineligible tomorrow. It could also mean that a seller's home under contract may never close because the buyer's approval could be disqualified before the closing date is reached. If you're a home buyer and your profile is not "ideal" to a bank, now may be a good time to write a contract be ...

The Cost Of Living Includes The Cost Of Gas And Food (And May Get More Expensive Through The Winter) 2007-11-16 08:28:34 October's Consumer Price Index was released Thursday and showed a 3.5 percent increase in the cost of living since October 2006. The report also showed a core inflation rate of 2.2 percent. The "core CPI" is a smaller part of the overall CPI. The math is the same, but it specifically excludes cost changes in energy products and food products because these two elements can be highly volatile. When tracking inflation, therefore, economists tend to focus on core CPI instead of "regular" CPI. Both are important -- Core for long-terms trends, and total for short-term consumer sentiment. Inflation makes life more expensive and with more money spent to live, there's less money for savings and/or discretionary spending, and that slows down the economy. USA Today ran a terrific quote from a accountant in San Diego on this topic: "Have I been hit by rising energy prices? Hello! I live in the San Diego area, and I'm paying $3.41 a gallon," says Tage Woehl, an accountant. "On a 15-gall ...

"How Much Will I Pay For My Mortgage Each Month?" 2007-11-15 09:49:19 "How much will I pay for my mortgage each month?" It's a basic question that every homebuyer wants answered and with over 6 million Google results for "mortgage calculator", finding an easy-to-use mortgage payment calculator can be a challenge. Many calculators have an abundance of features and/or ask large amounts of non-essential questions. It can leave a person feeling outright confused. All that is needed to calculate an amortizing mortgage payment is three pieces of information: Loan size Interest rate Length of loan in years So, if your home loan is an amortizing loan (i.e. not interest only), keep it simple -- use Bankrate.com's mortgage calculator. Bankrate.com's calculator asks for the three inputs above, asks you to click "Calculate", and then spits back your expected payment. Remember that your taxes and other monthly payments will not be included in this figure. If your loan is non-amortizing (i.e. interest only), the math is simple enough that you can do it yourself ...

Where You Find Speculators, You May Also Find Failures 2007-11-14 07:05:00 This morning, RealtyTrac released its Q3 2007 foreclosure data for the United States. The leading cities for foreclosures are: Stockton, CA (1 per 31 households) Detroit, MI (1 per 33 households) Riverside/San Bernardino, CA (1 per 43 households) Fort Lauderdale, FL (1 per 48 households) Las Vegas, NV (1 per 48 households) Sacramento, CA (1 per 48 households) Cleveland, OH (1 per 57 households) Miami, FL (1 per 60 households) Bakersfield, CA (1 per 64 households) Oakland, CA (1 per 71 households) Looking more closely, we can see pattern. California, Nevada, and Florida are well represented and that makes sense. Between 2002 and 2006, these areas were popular with speculators, many of whom used 2- and 3-year adjustable rate mortgages that did not require income verification, nor did they require downpayments in excess of 5 percent. These loans are now adjusting and in 2007, mortgages for investors are more stringent. They typically require a 10-20% equity position and verifiable inco ...

Homeowners Should Have Basic Wills 2007-11-13 05:00:00 Statistic #1: According to the Census Bureau, 69% of Americans are homeowners. Statistic #2: According to lawyers.com, 42% of Americans have a basic will. Basic Math: 27% of American homeowners are in need of a basic will. Addressing mortality can be difficult for some people, but even more difficult is addressing a home that's been put in probate after a homeowner's death. If you own a home -- whether you have a spouse, children, both, or neither -- it makes sense to speak with an estate planning attorney to understand your options. Death is inevitable, so preparing for it is prudent. ...

The Simple Math Of How Mortgage Rates Are Born 2007-11-09 08:39:09 We talk a lot about how mortgage bonds are the driving force behind mortgage rates but we never get into the math of it. So, to help our understanding of the subject, let's delve a little deeper. Here's the (very simplified) math behind it: If you pay $100 today for a $6 annual interest payment over 30 years and then you get your $100 back, you would have earned 6.000% on your money. But, if you paid $98 today for that same $6 annual interest payment, your rate would have be 6.122%. If you paid $102 today for that same $6 annual interest payment, your rate would have be 5.882%. Because the interest rate of a particular bond never changes, we can see how lower price leads to a higher yield, or rate, and vice versa. This basic math is why mortgage bond prices and mortgage rates move in opposite directions. Now, the price of mortgage bonds is determined by the demand for them. When demand for mortgage bonds increases, the price for mortgage bonds increases. By contrast, when the dem ...

Mortgage Rates Fall For ARMs Faster Than For Fixed Rate Mortgages 2007-11-08 06:00:00 After running neck-and-neck for several months, interest rates for fixed-rate mortgages and adjustable-rate mortgages are finally diverging. Despite pricing worse than its fixed-rate counterpart throughout much of August and September, ARMs are now close to 0.375 percent lower for conforming products sold through Fannie Mae and Freddie Mac. This equates to roughly $25 per month per $100,000 borrowed. If you know that you don't need a 30-year rate commitment from your lender, you may find that a well-structured ARM is a real money-saver. (Image courtesy: Bankrate.com) ...

Why Downpayments Are Investments, Not Cushions 2007-11-07 09:21:44 When home prices are stable or falling, home buyers often mischaracterized their downpayment on a home, calling it their "cushion" against falling home prices. Nothing could be farther from the truth. Nobody wants to owe money when they sell their home. In fact, when asked, most people will answer that they just want to "break even" on their sale. So, if that person later sells their home for $30,000 less than they paid for it plus the cost of improvements, $30,000 is their loss. If their initial downpayment happened to be $30,000 and they walk away from the closing table "even", it doesn't change the fact the home owner lost $30,000 on the sale. The downpayment is not a cushion -- it's an investment. And in the face of falling prices, it can be a simple game of Pay Now, or Pay Later. ...

It's Not Your Imagination : Getting A Home Loan Is More Challenging For Everyone 2007-11-06 09:51:49 If it feels like mortgage approvals are harder to come by than in years past, that's because it is. And we're not just talking about sub-prime mortgages for which the market has nearly vanished in just 12 months. According to a story on Marketwatch, mortgage guidelines are more challenging for everyone to meet. The Federal Reserve conducts a quarterly survey of senior bank lending officials and in its most recent survey, nearly half of the banks said that their respective underwriting process have tightened, forcing borrowers to "jump over a higher bar" in order to get approved. As a home buyer and/or homeowner, you can't do much about the banks, or the mortgage markets. But, you can make strides to make your personal application stronger and that process starts with your credit score. If you're planning to make a move within the next 12 months, it's never too soon to get a credit consultation from a trusted mortgage loan officer or other financial professional. Yes, banks ...

Why Driving Extra Miles For Cheaper Gas May Be A Waste Of Money 2007-11-05 09:35:00 With gas prices up 37% nationally since this time last year, Americans have grown accustomed to driving a little bit further just to find a "gas bargain". But, is it worth it? Based on today's national average gas price of $3.00 and assuming a 15-gallon fill-up and a 20 miles-per-gallon vehicle, a car owner would need to see 1 cent savings per gallon at the pump for each extra mile driven in search of better gas prices. Broken down: If gas costs $3.00 per gallon and the car gets 20 miles per gallon, it costs 15 cents/mile to drive the car. If the car fills up with 15 gallons, a one-penny savings per gallon would yield 15 cents in savings. 15 cents is the same amount of money it cost to drive the extra mile to the "cheaper" gas. This isn't an absolute, of course. The one-penny-per-mile rule varies according to several factors: The gas mileage of your vehicle: The worse your car's gas efficiency, the fewer miles you should drive to find less expensive gas. The savings at the pu ...

Why Wealthy Americans Are 25% More Likely To Hold Mortgage Debt 2007-11-02 07:00:00 Interesting fact of the day, from MSN Money: 55.5% of "wealthy" Americans have mortgages on their primary homes vs. 44.6% of the overall population. This doesn't mean that the wealthy are more indebted than the rest of us, but it may mean that the wealthy are maximizing the tax deductions that the IRS makes available to every homeowner in the country. Unlike every other type of consumer debt, interest paid on most home loans is tax-deductible and is deducted from the homeowner's annual income. For this reason, a homeowner's "bottom line" interest cost is much, much less than his note rate. If you are in the 28% tax , for example, and your note rate is 6.00%, your "bottom line" interest rate is 4.32% after factoring in the tax deductibility of your interest payments. Check with your CPA for exact math, of course, but you can see how mortgage debt may fit into a professionally-managed financial plan that features annual returns higher than 4.32%. Wealthy or not, every homeown ...

Making English Out Of Fed-Speak (October 2007 Edition) 2007-11-01 08:32:24 The Fed lowered the Fed Funds Rate by 0.250% yesterday. The widely-expected rate decrease was well-received by stock markets to the detriment of mortgage bonds. Mortgage rates climbed higher yesterday afternoon as demand for mortgage bonds waned. This further illustrates that the Federal Reserve does not control mortgage rates. The FFR fell; mortgage rates rose. Because it is tied to the Fed Funds Rate, Prime Rate fell by 0.250% yesterday, too. Holders of home equity lines of credit and credit card debt benefited from the change and will see lower interest costs in next month's statements. In the statement above -- as explained by The Wall Street Journal -- the Fed expresses concern about the housing slump while noting that the economy seems to be finding a balance. This means that future rate cuts are less likely. SourceParsing the Fed StatementThe Wall Street Journal OnlineOctober 31, 2007http://online.wsj.com/mdcapp/public/page/2_3024-info_fedparse_shell.html ...

What Is The Fed Funds Rate? 2007-10-31 09:17:00 The Federal Open Market Committee adjourns from its two-day meeting this afternoon and is widely expected to lower the Fed Funds Rate. This does not mean that mortgage rates are being lowered, too. The definition of Fed Funds Rate from the Federal Reserve: The federal funds rate is the rate charged by one depository institution on an overnight sale of immediately available funds (balances at the Federal Reserve) to another depository institution; the rate may vary from depository institution to depository institution and from day to day. The target federal funds rate is set by the Federal Open Market Committee (FOMC). Notice that the words "consumer" and "mortgage" are nowhere to be found. That's because the Fed has nothing to do with them. The Fed does not control mortgage rates. The Federal Reserve's policy changes impact banks, which then impacts consumers in the form of "looser" or "tighter" credit standards. In lowering the Fed Funds Rate, the Federal Reserve stimulates t ...

How To Save Money By Choosing A Better Closing Date 2007-10-30 10:37:57 When a loan officer locks a mortgage rate for you, that rate is tied to an expiration date. The expiration may be 30 days, or 75 days, or 90 days, or more into the future, but so long as the rate is "locked", the bank is committed to delivering that rate to you at your closing. What most people don't know is that the longer the rate lock, in general, the higher the interest rate and/or fees and that's because banks can't predict the future. The more time that passes between today and your rate lock expiration, the more likely it is that market conditions will have changed from where they are today, and the bank will be "below market" on your individual loan. Therefore, banks compensate for this "time risk" by increasing their rate of return (i.e. your mortgage rate), and/or charging "extended lock fees" to borrowers. To lenders, rate locks represents a huge risk -- what if its prediction of the future is wrong? Rate locks vary from lender to lender, but in general, they move ...

It's A Terrific Time To Revisit Your Mortgage Rate 2007-10-29 08:00:00 If you bought your home sometime since March and your mortgage is a conforming home loan, you may be able to take advantage of the current mortgage market conditions. As of Friday, mortgage rates were near their lowest levels of the year. Of course, not every conforming borrower is eligible. For example, if you bought your home without a downpayment, or if your home has decreased in value since your purchase date, lower rates may be not be available to you. With the Federal Reserve meeting this week, mortgage rates are not expected to stay low for long. The last time the Fed met in September, it lowered the Fed Funds Rate. Later that day, mortgage rates increased on concerns about the U.S. economy. The Fed is expected to lower the Fed Funds Rate again after its two-day meeting October 30-31, 2007. If you haven't heard from your loan officer about last week's dip in rates, try contacting him/her directly. Or, if you'd like the name and contact information of a new loan office ...